GRND earnings call transcript, November 5, 2026

Hi, Nathan.

Good to talk to you, and thanks for the question. Let me start with strategic for 27, and then we can talk through the details to the extent that we can. We are thinking of three things that matter for next year. Number one, we want to get the acquisition integration right and set Freddie up for tremendous growth in the years to come because we think the potential is massive. Number two, we want to drive adoption for Edge to be quite high. We are really happy. with how things are going so far, getting ready for the launch, but obviously it's a really big launch for us. And if you think about Edge from a long-term perspective, it's a $100 to $150 million opportunity on the kind of conservative side of estimates over many years. And so we want to get that right. And number three, we really want to invest in the free user experience, given how far ahead of the three-year plan we are, having come in at 93% of the three-year plan for 27. This year and EBITDA range already being in the range that we had given for 2027, we feel like it's a really great time for us to invest in the long-term next year. So when you think about from that perspective, there are now three big revenue drivers inside GRINDER with Freddie. Number one, there's the core app and the subscription business plus the add-ons. Number two is the ad business. And number three is Freddie. We'll be right back. With the core business, the biggest driver is going to be edge. And we expect that to do very, very well. Obviously, we don't break out that as a revenue number, but our expectations are that it's going to perform very strongly. And if I had to break it out, probably we will achieve somewhere between a quarter and a third of what we want to achieve over the long term with edge in the first year. And we feel really confident about that.

With the ads business, we're going to have a year that is going to be more moderate than what you've seen in the last few years. We obviously, you know, have said this before, but ads should moderate back to being in that 15-16% of the total revenue range, which I think we've repeatedly said throughout this year, rather than the kind of 18-19% that it is today. Some of the reasons why ads has done so well is because we actually have been able to achieve a lot of the growth that we had expected. We'll see you next time.

We have a lot of other investments that we want to make for ads and next year will be a year that we do it. Another reason why ads will moderate is because we're losing approximately $10 million of telehealth direct ads revenue that we generated this year. So with Freddie coming on board, that revenue won't be available to us obviously anymore. And so that is going to moderate ads a little bit as well. Ads will grow, but will not grow at the pace that we would have seen in the past. And we're going to spend the year really investing into new ad formats and into some of our longer term investments to make the direct business grow faster over the long term. I think medium term, long term, I still believe that there is a significant amount of growth in ads beyond where we are now. We were at 30 million four years ago. We are nearly 100 now. And I think that there is a path to double or 2.5x that. And then with Freddie, the way we kind of think of Freddie for this coming year is to really focus on integrating the business. It's going to be a big step for us. We've never done that before as a business. It's our first acquisition. And I think it's really critical to get it right. And really focus on expanding our in-house pharmacy capacity and moving as many U.S. patients as possible from third-party pharmacists to our own pharmacies. And the reason... The reason that matters is because that is the key driver to making the unit economics, the market be better. Obviously, Freddie is already profitable, but for every patient that you have on your pharmacy, rather than third-party pharmacy, and they stay on with you for a full year, that's about $2,400 of more revenue a year versus if you're using a third-party pharmacy.

And so while we wouldn't expect every patient to be on the Freddie pharmacies... We want to move as many as we can to that. And then once we are in a place where we think our pharmacy operations are fully built out and have the capacity for a lot more, that would be the right time for us to start driving a lot more traffic into the Freddie experience and getting a lot more new patients. So the patient volume will increase in 2027, but it will be more moderate at pace. But then in 28 and beyond, we would expect the patient volume to grow at a faster pace. Thank you! Because, again, we would want to be growing in a very profitable way at maximum unit economics per patient that we can be achieving.

Yeah, that's very helpful. Just a few follow-ups on that last bit. How should we think about the engaging factors to expanding the in-house pharmacy? And then any way to think about the timeline there? And then you noted that once that happens, you can accelerate patient growth a little more. How are you thinking about how Freddie... ...shows up in the app near term until you have more of those in-house pharmacy targets achieved? Yeah, so all the investments that are necessary for Freddie are already assumed in the guidance that we're giving today. And I do want to highlight the fact that even with a pretty significant investment planned, we're still going to... You know, at the minimum, we're saying that we're going to deliver what's implied 39% margin, and that's within the... that we gave for the three-year plan in 2024. The reason we can do that is because we have a very high-margin business coming in next year, which is going to be Edge, and that's going to allow us to also do a significant amount of investments for Freddie while having, you know, the margin that we had committed to in the past when we had never envisioned doing something like Freddie at the time. Freddie already has some pharmacy capacity in the U.S., a reasonable amount. We have a pharmacy in Texas. a pharmacy in California as well. We need to add another, at least one more pharmacy in the U.S., and there's work already ongoing to do that. And then there's a lot of regulatory kind of pieces to manage there. The pharmacies that Freddie has today are retail pharmacies. You can utilize those for mail order, but that's not the only thing that they should be doing.

We want to be able to get in a situation where we have the ability to do just mail order. I'm a pharmacy location as well, and there's just a bunch of regulatory and BD pieces that need to be managed there, which we are working through today, and that is going to be a key part of that. I think it's also important to highlight on that piece, you know, Freddie is an operational business. That is very different than what Grindr is used to today. I, for better or worse, have run an operational business before, one with far worse margins than Freddie has, and so I kind of... Understand the challenges of an operational business from that point of view, and people matter in that business a ton, and yes, you can have operations and process and structure to ensure that quality experience across the board, that people still deliver it, and so it's both the pharmacies themselves, but also the people in the pharmacies, meaning the pharmacists, the techs, and ensuring that we are delivering as good of a customer experience as possible is going to be a big focus for next year. As far as how the Freddie product is going to... So to start with, we had built a bunch of different native placements for woodwork that we are now using for Freddie. About a little over half of those placements are already being utilized for Freddie. And over time, we will switch all of them to be available for Freddie. These are in effect advertisements, but they're very natively built into the product and make a lot more sense to the user.

We also have... We also have a health center, which you can access in the app as well. And there, Freddie is now going to take a leading position because it's going to be messaged around, hey, get PrEP, and you can get PrEP directly from there. Today, you still get sent out to the Freddie website to go through the process of getting PrEP prescriptions there, but we want to actually integrate that fully into the GrindRap so you don't have to leave the app at all and can do it all within our experience. And we also are... working on creating a bunch of new placements. You know, for example, adding a placement for an ED medication on a person's profile probably didn't make sense. It wouldn't feel very native. But on the Grindr profile, each individual user is able to say, you know, I am on PrEP. Well, in that space, having a placement that allows a person who is looking at your profile to also click on a button and get PrEP is a very native thing. It takes a ton of sense. And so we're going to build new placements like that across the app to have more places where we're educating people on both, you should be on PrEP and here's PrEP available directly through the Grindr experience. That's all going to be kind of coming, you know, not in too distant future in 2027. There are a few pieces beyond that that we want to do that's going to take a little bit longer. We want to be able to have verified badges on a person's profile.

If they have done a HIV test with Grindr, with Freddy, and or if they have received a Freddy prescription as well. And, you know, we believe having, giving people the option to choose to show that information on the app, obviously it's going to be all with user consent, will make their profiles a lot more interesting to people. You know, a very large number of people on Grindr already say whether they're HIV positive or negative on the profile, but that's... It's self-reported. Now think about that whether if it's actually verified, hey, we know that they had a test on this date and these were the test results. Again, that would only be done with user consent, but showing that information on the profile will make the profile be a lot more relevant to people and a lot more trustworthy to the other users that are seeing it. That's an added benefit to the user. It's also an added benefit to also promoting the fact that any other user can have a similar type of profile if they go through an HIV test process. So that is going to be something that's going to take a little bit longer to build out because there is a lot of data integrity management that needs to happen between the Grindr side and the Freddie side. And we're starting to work on that, but we'll need a little bit more time. And then the last thing that we're envisioning is giving Freddie patients access to Grindr premium products and features as part of their Freddie prescription or as part of their visit with a doctor.

Right. So if you have a visit with a Freddie doctor. Then you also can get Grindr premium access at the same time. That's something that also will take time to build out and integrate. There is a lot of data kind of management to do in that regard as well. But that is something that we are envisioning also. The way to think about this is if you do a survey of Grindr users, making sure that they are managing properly for HIV risk is among the most important things that people care about. And so I believe that that's what you're going to use. are going to be very comfortable and very supportive of us utilizing as much of the app as we can to educate more people to be on PrEP and to get people to be compliant with staying on their PrEP medications. Because this is something that matters both to the individual who is on PrEP and for that person's health, but also for the PrEP of all the other men that are on Grindr looking to connect. And so that is actually why the two businesses make so much sense together. And we certainly are going to... We're going to be using the Grindr app in a very powerful way to both educate people beyond PrEP and, hey, here's a direct access to PrEP in a very simple way within the app that you're using for an hour a day. Very helpful. Thank you.

Thanks, Eric, and great to talk to you. I think these are great questions, so I appreciate them. Let me start with the very last of what you said, which is pricing elasticity. We raised prices fairly markedly this year, about 20% across the board, and so virtually no churn in terms of users churning off the experience. Quite frankly, it was better than even we had expected or tested into it, and so I think that tells you that there is quite a bit of pricing elasticity power in the product, and I'm not saying we're going to raise prices again in the immediate term. That is totally not the plan. I think one of the reasons why that worked so well is because we had created a ton of value in the tiers over time, and then we raised prices, so people were much more comfortable, like, wait, I'm getting a lot more out of this tier. It's reasonable for it to be a little bit more expensive, and so we will focus on adding more value in the value. You know, 2027 period, and then revisit where the pricing should be on the current tiers beyond that. Now, with going to EdgePoint, we are really happy with the registrations that we have seen in the pre-registration period. This is, we told people, if you are interested in having early access, which is going to come on November 10th, please register here. And so then people gave us their registration information through that path, and demand was tremendous. We had estimated maybe we'd get about

100,000 people over a seven-day period, and instead we got 400,000 registrations in a 72-hour window and more since. And so that was really awesome. When we think about how big Edge can potentially be, we're really kind of circling around somewhere between one-third of a percent to two-thirds of a percent of our mouth, meaning one percent of a percent of our mouth. If we achieve two-thirds of one percent of mouth at the current price that we are starting Edge with, which is $120, that is a $150 million revenue opportunity, assuming that person stays with Edge for a full year. So even kind of on that low-end calculation with a lower-end price that we are launching with, you're already building an amazing business that is extremely high margin. As well. You know, at this point, our view is that we're going to hard cap it at no more than 1% of our mile for now. Now, obviously, long-term, if we feel like there's room to increase that, we could, but that's going to be the approach that we take. We do not expect to be at two-thirds of 1% in year one, right? That would be too much to achieve in one year. But if we could do something like, you know, 20 to 30% of that in the first year of it being live, we would be very happy with that. And I would call that a complete home run as far as what we would like to see from edge. We believe that we can do it based on the testing that we've done so far. And the reason we launched at the price that we did, even though we could have gone at a higher price and testing data supported a higher price, is because we wanted to have a lot of demand, get a lot of excitement for this, and then have pricing power in the future to either move to longer term plans like, you know, two months, three months at a time, or to move to a higher price point.

At a later date. With regards to VIP, I know this is something that we are working on and have been for a while. Edge is not the highest price point that we're envisioning for Grindr. This VIP product is something that we're envisioning beyond that. Now, that's going to be limited to a much smaller cohort of people. I know we're truly thinking like a VIP experience that is going to combine in-app features with off-app experiences. One of the things that... you know, struck me in user research and talking to people. I host dinners with what you would view as kind of long-term VIP customers of Grindr on a regular basis is people are really excited about the opportunity to have in-person engagement with people like them that might not be in their normal business network, but have a lot of other similarities to them and their lifestyles. And, you know... That can be people going to events together. It can be that we host parties for them, etc. So there'll be a lot of off-app experiences that we're envisioning for the VIP tier. As an example, you know, in January, we are hosting a very select group of people for an event at Aspen Ski Week. It's going to be for a pretty small cohort of people, but it's kind of our experimentation of getting to these very high-end VIP events and activities. So our vision for a VIP product is going to have this offline component, and then it's going to have an online component inside the app where they're going to get features similar to Edge, but even more powerful than what you have in Edge.

And there will also be the group of people that will be getting a lot of our features first, and then once they've kind of fully permeated and used them a lot, then we might then be available for the Edge tier as well. We believe that between these two... things, in-app features and off-app features, the price point for VIP can be far, far higher than what we are envisioning for Edge. Now, again, for a very small cohort of people, it is kind of what we are envisioning here, and I'm really excited about this product. It's something that, frankly, I've thought about for a few years now, and it's really fun to now be in a place where you're actually getting it to market and start engaging users with it. There's not a big... a new assumption for VIP in 2027. Frankly, there's zero in the guidance that we're giving, but it is going to be something that we want to be in as good of a position for growth in 2028 as edges today for 2027. Great. Thank you.

In terms of what we want to work on for next year on the core side. We have a very good plan, I think, and we're really excited about that. Historically, if you look back, you know, the last six years, a really big portion of Grindr's engineering capacity was focused on either premium products and freemium products where we would be making money or in redoing the architectural components of the app that were causing users significant challenges, including rewriting the chat infrastructure, rewriting the back end completely, rewriting the front end nearly completely. All of that is now complete. And, you know, the data infrastructure is also built out inside the app and on our back end. The result of that is our crash rates are down massively. The bugs in the app are down in a dramatic manner. And this is all very clear to users because I hear about it from them all the time. And that's really fantastic. But that's going to free up a pretty sick. We have a significant amount of resourcing that we can now use for product development as well, for new product development. And then one big difference between next year and previous years is that we're going to really focus a bigger portion of the team on product development for the free user and things that just make sense for the free user. Whether or not they make sense for premiumization or paid products will be determined in the future. We want to build products that free users will love and will use a lot.

And then we will think about how to monetize those, if at all, later on. One of my kind of, you know, learnings of the last four years is that we probably went to monetization of right now too fast. Right now it's captured a really fantastic user base. They're using it all the time. But we probably should have kept it freer for longer than we did. Because I think it would have made the product even better than it already has been. And so we want to be in a place where we are building a lot of things for the free user. Making them to use them for a long time. And through that, ensuring that we protect the Grindr mode and protect Grindr as the app of choice for gay men in the U.S. and around the world. So hopefully that answers the question. Yeah, very, very helpful. Thank you. And maybe one more if I could. I mean, you've been one of the biggest proponents of AI usage, I think, in our coverage space. And certainly one of the ones who has been put the most numbered. Around how it's helped engineer productivity and things like that. With some of the recent advances in AI tools, what are you seeing maybe over the last three to six months that have been some of the biggest unlocks for your internal teams using AI? And how do you think that that sets you up for 27? Thank you. Yeah, we are super happy, honestly, with what the engineering team has been doing with that. And we're continuing to see.

Massive improvements in how much productivity they're gaining. The way I answer this question regularly now is when I joined Grindr about six or nine months into it, I met for a mentorship meeting with a retiring CEO of a very large tech company. And I told them what I'm envisioning for the next three, four years. And I'm like, I think I'll need somewhere between 150 and 200 engineers in 2026 to do all the things that I want us to do at the time. And he looked at me and he's like, no, you won't. You'll be fine with about 60 to 70. And I'm like, what are you talking about? Even at 150 to 200 people, that's like a super lean team because revenue is going to grow so much. And he kept insisting, like, no, you won't. And his rationale was, it's because the things I'm seeing coming down the pike, having just been inside some of the AI labs and companies at the forefront of this that are not yet publicly known, but will come, in a year or two, the amount of product you're going to have from engineering is just going to be fundamentally different. And so when you think about that conversation and think about it today, he was right and I was right. I actually would have needed a 100 to 250% team to do this stuff that we're doing. And, you know, that that makes sense. But we're able to do it with about 60 people on the product engineering side. So we have more engineers than 60, but product engineers are roughly 60. And it's because each engineer,

we have a fair analogy, but we're both about 60 people saying, oh, I hate it. All right. Today is roughly 2.5 to 3x more productive than they were a year or 18 months ago. And that's pretty remarkable. Now, there are things to be cautious about or to manage for. Number one is bugs and kind of risks that the AI created code might put into the product. And that's something that we are managing very thoughtfully and carefully. And it's very much top of mind for our engineering leadership. And I got an email about what we're going to be doing about it actually today. From the team. And so that's, I think, really important. And the other big factor is security. You know, the risks around data security and your infrastructure security are greater today because of AI than they have ever been. Not because of anything you might be doing on your side, but because bad actors can use AI to attack you in ways that previously were not possible. And so that's the other big top of mind topic for us in terms of what to do really well and ensure that we protect the grind of users as much as possible. So you have to balance the benefits that you're getting from AI with these two other factors at the same time. The last thing I'll mention is where I think really big opportunities are, and I hope people are working on these outside of Grindr, is giving teams outside of engineering the tooling that they need to also be able to increase their productivity at a similar pace.

One of the things we are finding at Grindr today is that engineers are so far ahead of everybody else that the rest of the organization can't. We cannot keep up with them at the pace that it needs to, especially on the product and the design side. And part of that is because the technology is not yet there for product and for design to be able to use AI in the same way. But it's starting to be there more. We've recently introduced some new tools into the Grindr ecosystem for engineers. One in particular is called Devon. And with Devon, now we can be in a place where our designers are going to start using that and our PMs are going to start using that as well to actually produce code also. So please thank you. Great. Thank you.

With regards to the revenue split, I think you. Can assume roughly 50, 50 between, between pharmacy and telehealth. I think, you know, maybe 60, 60, 40 would be the place that I would, I would position you to. So 60 on the telehealth side and 40 on the pharmacy side.

This completes the allotted time for questions. I will now turn the call back over to George Aras.

for any closing remarks. Well, thank you everybody for joining. I'm really excited for the quarter that we had and happy to be giving guidance a quarter early for what is going to be a really amazing year for GRINDER in 2027.